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Dec 06

Sales Tax Distribution Report & Advice

Posted on December 6, 2016 at 5:25 PM by Paige Worsham

December 2016

                       October 2016 Collections – December 2016 Distributions

Current estimates are that the NCDOR will distribute $251.6 million in sales tax revenues to our counties and cities. This is $10.9 million less than last month, but $15.9 million more than the same time last year.


Even when Articles 43 and 46 are excluded (as these are not utilized in all 100 counties), the pattern remains essentially the same.


Interestingly, this does not seem to reflect the 0.3% increase in national personal consumption expenditures (pce) during the same period.

Looking forward to the next distribution, there is some room for encouragement. At the state level, sales and use tax revenues for November were up 11.62% over this time last year. (This is contributing significantly to a statewide overall revenue growth rate of 6.29% year over year). Based on these numbers, locals should see a little more money in their pockets. However, the last several years have proven that the local base tends to grow at a different rate from the state base. In addition, the continuing shift away from in-store to on-line shopping, as seen over the Black Friday weekend, will tend to cause the state and local numbers to diverge. The graph below from the National Retail Federation shows the distribution of sales by type of brick and mortar store. This could be useful if you are familiar with the makeup of your mix of local retail establishments.


Looking farther down the road, the path is not entirely clear. Dr. Mike Walden’s state level economic forecast suggests that North Carolina’s economy will be steady, but down slightly, in the coming months. This small decline will be driven primarily by a large increase in jobless claims, and a less pronounced but still significant reduction in manufacturing work hours. These were countered to some degree by improvements in the number of building permits issued and manufacturing earnings. However, this does not assume any significant change in US tax and economic policy. Therefore, any major changes, or discussion of changes, by the new administrations and legislative bodies could shift the calculus.


This general, low level of uncertainty about the future is also reflected in the Federal Reserve Bank of St. Louis’ Economic Policy Uncertainty Index. This showed a sharp uptick in uncertainty a few days after the election. This has been followed most recently with several days of slightly elevated indicators. While volatility in the index is common after an election, it generally sets in closer to January.



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